February 6, 2009

One way to get a sense of what happened to mortgages, where the government doesn't track default rates by race, is to look at default rates for college loans. From a 2007 Education Sector article by Eric Dillon: "A Closer Look at Student Loan Default Rates:"

Black students who graduated in 1992–93 school year had an overall default rate that was over five times higher than white students and over nine times higher than Asian students. The differences for Hispanic students are not as large, but are still substantial. Hispanic students' overall default rate was over twice that of white students and four times higher than Asian students. And these differences cannot be fully explained by differences in borrowing patterns or salaries. The 1994 percentage of monthly income going to student loan payments—an indication of both how much debt a student has and their earnings—was actually lowest for Hispanic students and only slightly higher than average for black students. ...

The median monthly loan payment as a percentage of monthly income in 1994 for recent 1992–93 graduates was 6.7 percent for the United States as a whole, 7.4 percent for Asian students, 7.2 percent for black students, 5.3 percent for Hispanic students, and 6.8 percent for white students.

In other words, income didn't have much to do with default rates. (On the other hand, whites and Asians would be more likely to have relatives who could help them out repaying their loans during hard times. That's something that's overlooked in thinking about mortgages, as well.)

29 comments:

Michael T
said...

What effect would pushing blacks into a higher education they're not really suited for, with the consequent professional-level underemployment and thus lower wages (and maybe a bit of resultant angst to boot), have on black default rates? In other words, what effect these 'structural' reasons above and beyond expected black psychopathology?

Also, the article has a table relating salaries and default rates, with low salaries strongly associated with default, so this is an ugly error. The minorities had lower incomes, and defaulted more, like other low-income people. There was probably an additional race-based effect (IQ, wealth of relatives, etc), but you should have been more careful and finished the article.

The minorities had lower incomes, and defaulted more, like other low-income people.

That claim is never made in the article. The authors placed being in a low income job and being black or Hispanic as independent predictors of a higher default rate. Regarding the 'fixed cost' argument: In principle that might have some traction, but you'd have to make the argument that the fixed costs you mentioned, food and rent, were really that, fixed across incomes. That's highly unlikely. People with lower income would naturally have lower costs for those things. Plus, that argument would have to assume a massively lower average loan amount for black and Hispanic borrowers to account for the lower incomes, so as to keep the percentages going to loans constant. Given family resources and all, is that likely?

"The median monthly loan payment as a percentage of monthly income in 1994 for recent 1992–93 graduates was 6.7 percent for the United States as a whole, 7.4 percent for Asian students, 7.2 percent for black students, 5.3 percent for Hispanic students, and 6.8 percent for white students."

So Asians had a bigger percentage of their income go to loan payments AND have a lower default rate, while Hispanics have a smaller percentage of their income go to loan payments AND have a higher default rate.

Fantastic article. It really is a precarious game the elites are playing with egalitarianism.

A good article that relates to this is the following:

"Now the elites are running a tight gambit. The elites are capitalists, members of one class. They are using ‘the masses,’ another class to create a desired outcome, and they are using the engines of mass democracy to do this."http://cordeliaforlear.blogspot.com/2009/02/how-to-revive-west_06.html

The recent flurry of education related posts here shows a failure to grasp the situation.

Bill Gates as sucker? Please.

None of these school programs are "failing". None of the student loan programs are "failing". Everything is going according to plan because The Plan is to dumb down ("reeducate") the American population and fleece them at the same time.

Similar to the Elect a New People immigration plan, whereby the population not only is displaced but also is forced to pay for their displacement, the school programs are constructed to dumb down the population and also make them pay dearly for the privilege of being dumbed down. Actually many pay twice when the all of the interest is added up.

The Denninger finance site has a great thread on the plundering of student loan debtors:

How long until people grasp the fact that the country is in the grips of a hostile elite? The New American Elite wants dumbed down debt slaves and the system is constructed to produced exactly that. The elites do NOT want a financially independent and well-informed citizenry.

The system IS working perfectly.

It is only those who lack awareness of the true goals of the system who cry and moan about "failure" decade after decade after decade.

If the richest top 1% of America wanted to "fix" the education system they could do it overnight. But it is working very well for them, so why fix what isn't broken?

The elites don't want a population of stable families steeped in cultural traditions.

The elites don't want a population capable of critical thinking.

The elites don't want a middle class and they don't want easy movement between the classes.

> The median monthly loan payment as a percentage of monthly income in 1994 for recent 1992–93 graduates was 6.7 percent for the United States as a whole...

Presumably the author is discussing the monthly payback amount divided by the monthly salary, for those people still paying. However, if a large percentage of debtors end up defaulting, the experience of that cohort becomes significant. What percentage of monthly income would the monthly payment-due amount to, for the 39% of Non-Hispanic Blacks who are defaulting? It's likely higher than the 7.2% figure given for the non-defaulters, probably much higher. If so, this would mean that the burdens blacks are taking on are relatively greater than a first-pass interpretation would suggest.

"Now the elites are running a tight gambit. The elites are capitalists, members of one class. They are using 'the masses,' another class to create a desired outcome, and they are using the engines of mass democracy to do this."http://cordeliaforlear.blogspot.com/2009/02/how-to-revive-west_06.html

Most colleges are too expensive to pay for by waiting tables or holding other jobs suitable for bight but inexperienced kids. Many state schools are still "affordable" in that sense, but not so much as they were 20 years ago.

For that matter, state schools cost a lot, too, but the taxpayer picks up the tab directly, instead of through student loans.

All that aside, Steve's parenthetical note at the bottom is the rationale liberals use for lots of poverty programs - people don't choose their families, and people who were born into poor and/or feckless families shouldn't be burdened by that. If black or hispanic kids have a higher default rate, it must be because they have poorer families who can't help them out, and we should tolerate that as the expense of making sure that they have the option of going to college.

The flaw in that argument is that finishing college ought to be a reasonably strong guarantee of enough income to pay off one's loans. For lots of the liberal arts and social sciences grads, it isn't, unless they spend another year or two in school to become teachers. So the real solution would be to stop subsidizing loans for people in programs where they won't end up making any more money than if they'd worked progressively responsible jobs for 4 years instead.

"On the other hand, whites and Asians would be more likely to have relatives who could help them out repaying their loans during hard times. That's something that's overlooked in thinking about mortgages, as well."

Well I'm sure there are no shortage of institutions and interest groups willing to hand out cash to black students. On the other hand we now finally know that Asians are smarter than whites. That was the only thing I could see on the graph. Did I miss something else...?

Steve, your education articles are really interesting. But the reason they get so little traction is because ordinary people just get bored when they read the word “education”, even if what is going on here is outrageous. Seriously, for most people school was a drag, and many in uni were dreaming of surfing and partying instead of learning. So the fact that Gates gets into this can only mean:

- he's trying to undo not having gotten a formal education (solution: just go to uni again)- he's trying to change America (most likely)- he wants to be a social hero by achieving the impossible (with our money of course)- he’s being disillusional

You know the only topics which really get traffic on your blog are anything to do with Michelle Obama, Jews and chicks (sex).

"The 1994 percentage of monthly income going to student loan payments—an indication of both how much debt a student has and their earnings—was actually lowest for Hispanic students and only slightly higher than average for black students"

That doesn't necessarily mean what you think it means.

Someone who dropped out of college after two years would have less debt, but perhaps be worse off with respect to paying it than someone who has twice as much debt but also has a four-year degree.

I just realized today how in our common culture (insofar as we could be said to have one) the "emotional geography" - if you'll let me coin a new term - has shifted to be more representative of colored peoples than of white peoples.

You can see this with the way "Love" and "Hate" are used in pop cultural parlance nowadays.

Common urban slang is "show me some love". Love is used in this case just to indicate merely liking someone or camaraderie. It has completely lost the undertones of deep devotion and loyalty which it had in previous times - see Kiplings "The Blood" for a description of the bond between people in European societies, or see any old literature.

An even better example would be the use of the word "hate". Today, any tiny antagonism or criticism can be considered "hate". This reflects the emotional pallette of a child who can't take criticism. The boundaries this places on free discussion are obvious - if you look at "urban" internet message boards (i.e. those frequented typically by a melange of whites and NAMs), you see that almost every discussion degenerates into name-calling and insults. This occurs whenever anyone is threatened or challenged. Theres just nothing civil about this way of interacting.

Our society's way of dealing with emotions is increasingly coming to resemble that of an imbecilic fiery "youf" who can't take criticism and sees antagonism and insult in everything. "Standards" exist so that other people can be held to them punitively. Emotions exist to be wallowed in and indulged, and anyone who questions anything you do is an ill-meaning foe, bent on "keeping you down".

A good empirical place at which this can be observed are reality television shows, where white people exhibit behavior in front of the public eye which would have been considered totally unacceptable just 50 years ago. They have outbursts, break things, scream obscenities - they basically act like black people when they are "flippin out" and "wildin". One can see how in the absence of law enforcement these people tend to use violence on each other quite regularly. Its all there in the screaming, the drama, the sensitivity to criticism, and the childishness. Thats all just one step away from someone resorting to outright violence.

(hope this random post didnt disrupt the people who want to comment further on the contents of the thread. )

An even better example would be the use of the word "hate". Today, any tiny antagonism or criticism can be considered "hate".

I have noticed the same thing.

Simplification, emotionalization, personalization. Can you disagree with an opinion or claim I have without reference to me, still less injury to me? No: personalize. There is no difference between my self and what I think. But this "injury" is surely an unintended side-effect, regrettable but nobody's fault? No: emotionalize. Your disagreement with me is an expression of your negative feelings toward me. But can't these feelings extend over a range that includes bemusement, vague disdain, mild irritation? No: simplify. As you said, the slightest negative emotion is now classified as hate. There are no gradations.

All "hate speech" laws will evolve to become "disagreement speech laws".

I just realized today how in our common culture (insofar as we could be said to have one) the "emotional geography" - if you'll let me coin a new term - has shifted to be more representative of colored peoples than of white peoples.

I suspect that this is a consequence of the fact that more of the people seen on TV these days are of lower IQ and lesser education. This results from the prevalence of reality shows and gossip shows where once there would have been intellectual discussion panels, as TV goes relentlessly downmarket.

When you overlay that with a racial quota you get lower intellectual standards setting an example which becomes the norm and which leads to lower and lower standards.

The narrower the intellectual range available then the less the public are able to appreciate and exhibit nuance and, ultimately, everything is presented in black and white terms (literally and figuratively).

I suspect that this is a consequence of the fact that more of the people seen on TV these days are of lower IQ and lesser education.

ESPN currently features a large number - perhaps a majority - of black commentators, some of whom speak 'non-standard' English. On the one hand, this is fair, given the prevalence of blacks in sports; on the other hand, it results in the aforementioned lowering of cultural standards.

Half Sigma: The chart is about college graduates, so whatever distorting effects gross income as a function of years of college could have don't apply here.

Amac: It could be that those already defaulted on loans had a much higher percentage of income going to loan payments than those in compliance, but presumably that would apply across the races. Again, you'd have to assume that the loan characteristics of blacks and Hispanics were fundamentally different from whites and Asians and I don't see any widespread evidence of that. The absent data here would be the average loan balances by race and average income for graduates by race. I'd assume, given family resources differences and all, that the average loan balances for black and Hispanics would be higher than for whites and Asians (a possible confounding factor would be their predilection for high priced private schools). Given that, the fact that blacks and Hispanics still have either the same or slightly lower average monthly loan payments as a percentage of income entails exactly what I take Steve to be insinuating--it ain't the money that's the problem.

I would love to see some analysis that broke this out by major in school. At a first guess, note that default rate is inversely related to the impact on your racial group of affirmative action. Asians have a *harder* time getting into top schools relative to whites, who have it harder than hispanics, who have it harder than blacks.

This leads to two results:

a. A higher probability of dropping out or getting lousy grades and just barely graduating. I think the linked article was just looking at graduates, but your GPA and class rank will have some effect on your first job, though it probably won't affect the rest of your life in any other way.

b. The more overmatched you are in your school, the more likely you are to switch over to an easier major. And your prospects of paying off your student loans are *way* different if your undergrad degree was in something practical but tough (engineering, nursing, accounting) vs. something impractical and easy (English, Sociology). (On the other hand, there are very tough majors that aren't immediately practical either, like math, physics, or philosophy. But if you're in the bottom 10% of mathematical abilities at Caltech, you're probably not majoring in physics there.)

I wonder if there is good data before/after changes in affirmative action programs out there. If so, you could use the "natural experiment" of changing those programs to see whether AA was having a big impact on default rates by racial group.

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